India’s Directorate of Enforcement, or ED, has announced that it has frozen approximately $8.1 million in funds and conducted a search in connection with cryptocurrency exchange WazirX as part of an investigation into personal loan fraud.
In a Friday announcement, the Directorate of Enforcement alleged that WazirX has facilitated transactions by unnamed fintech firms “to buy crypto assets and then launder them abroad” as part of a scheme whereby Chinese-backed companies circumvent Indian licensing rules. . In its investigation, the ED said it had frozen WazirX bank accounts containing 646.7 million Indian rupees – about $8.1 million at the time of publication – and conducted a search in connection with co-founder Sameer Mhatre.
According to the regulator, the investigation is still ongoing. However, the ED claimed that the crypto exchange had “lax KYC standards” and “loose regulatory scrutiny” over transactions between WazirX and Binance, and failed to record the information necessary to verify the origin of the funds used to fund crypto. to buy from the alleged fraud.
“Despite repeatedly providing opportunities, WazirX failed to provide the crypto transactions of the suspected fintech APP companies and reveal the KYC of the wallets,” the ED said, adding:
“WazirX cannot provide an explanation for the missing crypto assets. It has made no effort to trace these crypto assets. By encouraging ambiguity and adopting lax AML standards, it has actively helped about 16 accused fintech companies to launder the proceeds of crime using the crypto route.
ED searches the director of WazirX Crypto-Currency Exchange and freezes his bank assets worth Rs 64.67 Crore for assisting accused Instant Loan APP companies in laundering fraud money through purchase and transfer of virtual crypto assets.
— ED (@dir_ed) August 5, 2022
In a Twitter thread from Friday, Binance CEO Changpeng Zhao said the company had “no equity in Zanmai Labs, the entity that operates WazirX and was founded by the original founders.” He added that “Binance only provides wallet services for WazirX as a technical solution”, while WazirX was responsible for KYC and other operations on the exchange.
Related: Indian Regulator Investigating Crypto Exchange Over Alleged Violations Of Forex Law
With the exodus of many crypto firms in China following a regulatory crackdown, many firms have reportedly turned to the markets in India. The ED reported that some fintech firms “backed by Chinese funds” had “piggybacked” on Indian companies with non-bank financial business licenses to offer loans to residents.
The ED took similar action against WazirX in June 2021, ordering the crypto exchange to prove the cause in connection with transactions of a money laundering investigation into illegal online gambling applications involving Chinese nationals. WazirX director Nischal Shetty said at the time the exchange “went on” [its] legal obligations by following Know Your Customer (KYC) and Anti Money Laundering (AML) processes and have always provided information to law enforcement authorities when needed.”
TSTIME contacted WazirX but received no response at the time of publication.